Proposed plans
It has been announced that the UK government are considering the possibility of hastening an increase in the state pension age to 68. Currently, the age to receive a state pension for both men and women is set at 66. However, this is due to rise to 67 between 2026 and 2028. The plans to increase the state pension age to 68 have been in place for some time, yet the government are now planning to bring this forward to 2037 – 2039, instead of the previously agreed 2044 – 2046.
The current increase in eligibility to receive a state pension will affect those born on or after April 1977. However, if the proposed change is passed through parliament, people born from the early 1970s onwards may be forced to postpone their retirement.
Will it go ahead?
The Department for Work and Pensions (DWP) are due to take a look at the issue in a review conducted between now and spring 2023. The report will take into account the differences across countries and regions in the UK and ascertain what the impact could be on more disadvantaged people if they have to wait longer to receive their state pension.
For example, there are considerable differences in life expectancy that must be considered. These can be due to wealth, as on the whole those in more affluent areas are more likely to remain healthy later in life, and therefore live longer.
If the government’s plans come to fruition, then it is very likely to cause significant public outcry. The bringing forward of the increase means people who have worked most of their lives already are forced to continue working past an age where many would have hoped to be enjoying their retirement. Furthermore, as the state pension is based on National Insurance contributions, many individuals will feel slighted. They will have paid into the system as instructed and are still being denied what they have been promised in exchange for many years of hard work.
The government are justifying the proposed increase due to the belief that life expectancy is rising across the board, the significant costs of an ageing population on the state pension as a result of this, and labour market trends. The DWP have said:
“As the number of people over state pension age increases, due to a growing population and people on average living longer, the Government needs to make sure that decisions on how to manage its costs are, robust, fair and transparent for taxpayers now and in the future.”
Could the opposite happen?
However, Becky O’Connor, who heads up pensions and savings at Interactive Investor, claims the opposite, with her findings showing life expectancy is not increasing on the whole and so this does not justify continuous increases to the state pension age.
If the DWP’s review agrees that life expectancy is slowing or stagnating, it is possible that the brakes could be placed on any rises.
The DWP’s review will be complete in spring 2023 and it is likely we will not get an answer on this until after this date has passed. However, it is something to be aware of when planning for your retirement if you are in the age group likely to be impacted.
As always, if you would like any further information regarding the above, please feel free to contact our offices by email info@williamsoncroft.co.uk.